Groupon is rolling out a new payments service today, which it hopes will create new reasons for merchants to continue using the Chicago daily deal provider.

In an interview, Mihir Shah, Groupon’s VP of Mobile and Merchant Products, confirmed to AllThingsD that Groupon Payments is available starting today in the U.S.

The launch follows a pilot program in the San Francisco area with more than 150 businesses. The service allows merchants to accept credit and debit cards by swiping them through a card reader attached to an iPhone or iPod touch.

While payments has become a very hot space over the past year, with many companies providing card readers for mobile devices, what stands out about its service is the price. At least, that’s what Groupon is hoping.

Shah said Groupon is guaranteeing it has the cheapest rates — and will beat a merchant’s current rates if it doesn’t. He said that merchants often don’t even know what they are paying because of complicated rate structures and monthly fees that make it hard to figure out.

Non-Groupon merchants can also sign up for the service, however, they will be charged slightly more (2.2 percent plus 15 cents for MasterCard, Visa and Discover)

Shah would not say whether Groupon was subsidizing the service for merchants willing to run coupons through its network, but it didn’t sound like it. He said, “It is certainly something great that we are giving Groupon merchants; we are it in for an actual business.”

Groupon is looking for new services that will drive additional revenue for the company to diversify away from its slowing coupons business. Other recent tools it has launched for merchants, such as online scheduling software or rewards programs, may make merchants happy, but haven’t necessarily been bringing in much additional revenue.

One big advantage Groupon will have in rolling out payments is that it already has a large sales force speaking to retailers on a regular basis. Still, other companies, like San Francisco-based Square, technically have a head start.

Square just closed a $200 million round on Monday, valuing it at $3.25 billion. As of yesterday, that was slightly more than Groupon’s public valuation of $3.07 billion. Additionally, Square is on pace to log $8 billion in transactions this year, and just signed up Starbucks as one of its customers. It also has a more simple rate structure than Groupon, charging 2.75 percent per transaction, or a flat rate of $275 a month (for those that do less than $250,000 a year in revenue). It is hard to say which one costs more, because it varies based on the number of transactions being completed and the types of cards being used.

Shah said Groupon Payments comes with other features, too. The service will use a card swiper that either plugs into the phone’s audio jack, like Square, or a phone case that is identical to the one used in Apple stores today to accept payments. The first one is free, while the more durable case costs $100.

The app, while primarily operated by the merchant, will also be used by the consumer to designate a tip; they can trace their fingertip along the screen to sign their signature, and enter their email address to receive an electronic receipt. Merchants will be able to view the transactions online, and they will receive the cash in their bank account overnight. Groupon will also provide customer support over the phone seven days a week. In addition, merchants will be able to use the app to scan and redeem Groupons, and to monitor additional spend over the value of the Groupon.

Shah doesn’t think that Groupon Payments will compete with Square, rather it is targeting existing “Groupon merchants, who are running a brick-and-mortar restaurant business, like a restaurant or spa, and have already been accepting credit cards for a long time, and have high volumes,” he said. “The thing that comes up again and again is credit card processing, and we think they are paying too much.”

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